The Employer commenced an adjudication against the Contractor, in which the Employer requested the adjudicator to make a declaration as to the true value of certain parts of the Contractor’s interim application for payment 27 and to award a payment to be made by the Contractor to the Employer. As part of the notice of adjudication, the Employer listed out the matters falling outside the scope of the adjudication.
The Contractor disputed the exclusion of certain matters from the adjudication and, as part of its defence, requested the adjudicator to determine its entitlement to further extensions of time and loss and expense.
In his decision, the adjudicator decided that, as the referring party in the adjudication, the Employer was able to limit, and had in fact limited, the scope of the adjudication and the adjudicator’s jurisdiction by way of the notice of adjudication. Accordingly, the adjudicator concluded that he was not able to decide whether the Contractor was entitled to an extension of time or loss and expense.
The adjudicator found in favour of the Employer, but the Contractor refused to comply with the adjudicator’s decision for a number of reasons, including that there had been a breach of natural justice by the adjudicator. The matter went to enforcement proceedings.
In her judgment, Mrs Justice O'Farrell DBE considered the legal authorities and made the following observations:
1. A referring party can define the dispute in its notice of adjudication.
2. Unless the referring party consents, the scope of the adjudication cannot be widened by a responding party. A responding party can, of course, commence its own adjudication in relation to any other matters in dispute between the parties.
3. A responding party can rebut the referring party’s claim by raising any defences which are properly arguable. By raising any defence, a responding party is not widening the scope of the adjudication.
4. If a referring party is simply asking the adjudicator for a declaration as to the value of certain items of the works, a responding party cannot ask for a declaration as to other items of the works.
5. If a referring party is asking the adjudicator for a declaration as to the value of certain items of the works and a payment in respect of those items, a responding party can rely on the valuation of other items of the works to show that a payment should not be awarded to the referring party.
6. It is up to the adjudicator to decide if a responding party’s defence is valid.
7. There may be a breach of the rules of natural justice if the adjudicator fails to consider whether the responding party’s defence is valid.
8. In order for there to a breach of natural justice, the breach must be material and will only arise in plain and obvious cases.
9. An adjudicator’s decision will not be enforced if there has been a breach of the rules of natural justice.
On the basis of those observations, Mrs Justice O'Farrell DBE held that the adjudicator had failed to appreciate that the Employer was claiming for a payment and, as such, the adjudicator was wrong to assume that he did not have jurisdiction to consider the Contractor’s claims. The adjudicator’s failure to consider the Contractor’s claims (and, in turn, a substantial part of the Contractor’s defence) was a material breach of the rules of natural justice. That breach was plain and obvious from the adjudicator’s decision, and rendered the adjudicator’s decision unenforceable.
The judgment in Global Switch Estates 1 Limited v Sudlows Limited demonstrates that if a referring party would like to avoid the matters referred to adjudication from increasing in scope, then that party needs to frame the relief sought in the notice of adjudication without reference to it recovering a payment from the responding party. Should you wish to discuss the scope of an adjudication or any other adjudication related issues, please contact us and we will be happy to assist.